Wednesday, September 24, 2008

Profits from Government Plan?

I have said that in principle the government should make a profit from serving as market maker of last resort: buying mortgage backed securities low and selling them high. With auctions being used at both ends, they might be able to pull it off; auctions are after all very good at setting prices.

Turns out I am in good company. Here is Warren Buffett saying the same thing:

"While "no one likes to write" a $700 billion check, Buffett thinks the government could make a profit when it eventually sells the now-toxic debt it would be acquiring in a bailout. "They could make money on this," he predicts, if it's handled properly."

Of course, trusting the government to handle this properly is taking a big bet...

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